What exactly is FIRPTA and why does it affect Canadians selling US property?

FIRPTA — the Foreign Investment in Real Property Tax Act — is a 1980 US federal law designed to ensure the US collects tax on capital gains earned by foreign persons selling US real property. The mechanism is a withholding obligation on the buyer: when you (a Canadian) sell US real estate to anyone, the buyer or their settlement agent is required by law to withhold 15% of the gross sale price and remit it to the IRS. This withholding is collected at closing — it is deducted from your sale proceeds before you receive anything. The withheld amount is not a final tax; it is a deposit against your estimated US capital gains tax liability. You file a US non-resident tax return (Form 1040-NR) after the year-end to calculate your actual tax owing, and if the withholding exceeds your actual tax (which it often does, because FIRPTA is calculated on gross proceeds not gains), the IRS refunds the difference — typically 6–18 months after filing.

Can I reduce the 15% withholding to something lower?

Yes — there are two main routes. First, the buyer primary residence exception: if the buyer (not you, the seller) intends to use the property as their primary residence, the withholding rate is reduced to 0% for sales at or below $300,000, or 10% for sales between $300,001 and $1,000,000. The buyer must sign an affidavit confirming this intended use. For sales above $1,000,000, no exception applies regardless of buyer intent. Second, the Withholding Certificate (Form 8288-B): you can apply to the IRS before or at closing for a withholding certificate that establishes your actual expected tax liability and reduces the withholding accordingly. If your expected tax is $20,000 on a $400,000 sale (5% of gross, vs the default 15%), you apply for a withholding certificate setting the withholding at $20,000. The IRS typically takes 3–6 months to process Form 8288-B — you must apply well in advance of your anticipated closing date. If the closing proceeds before the certificate is issued, the full 15% applies at closing and you file for refund afterward. For planned sales, applying for Form 8288-B is almost always worthwhile.

How do I report the US property sale on my Canadian tax return?

You report the sale on your Canadian T1 in two places. First, Schedule 3 (Capital Gains or Losses): report the adjusted cost base (in Canadian dollars at the exchange rate on your purchase date), the sale proceeds (in Canadian dollars at the exchange rate on the sale date), and the resulting capital gain. The 50% inclusion rate applies to the net gain, which is added to your taxable income for the year. Second, Form T2209 (Federal Foreign Tax Credits): claim the US federal tax you actually paid as a foreign tax credit. The credit reduces your Canadian federal tax by the verified US taxes paid, preventing double taxation. Important: only verifiable taxes actually paid count for the FTC — the FIRPTA withholding is not the tax paid; the actual tax calculated on your 1040-NR is. If the IRS issues a refund of excess withholding, your actual US tax is the net amount (withholding minus refund). You may need to file the Canadian return before you receive your US refund — report it on the basis of your expected actual tax, and amend if the final numbers differ. Provincial tax also applies in Canada — include the provincial FTC claim on your provincial return.

Why is Florida better than other US states for Canadians selling property?

Florida has no state income tax — and therefore no state capital gains tax. When you sell a Florida property as a Canadian, your US tax obligation is federal only. Compare this to a California property sale: California levies up to 13.3% state income tax on capital gains, with no long-term capital gains rate preference — all gains are taxed as ordinary income at the full state rate. A Canadian selling a $400,000 California property with a $180,000 gain would owe: $27,000 US federal CGT (at 15% LT rate) + approximately $23,940 California state tax (at 13.3%) = $50,940 total US tax. The same sale in Florida: $27,000 federal only. The Florida advantage — $23,940 — is entirely attributable to the state tax absence. This is one reason Florida has been a long-standing favourite for Canadian snowbird property: lower purchase and maintenance costs than California, and a dramatically more favourable exit tax position.

Do I need a US taxpayer identification number to file the 1040-NR and claim my FIRPTA refund?

Yes — you must have a US Individual Taxpayer Identification Number (ITIN) to file a Form 1040-NR and claim a FIRPTA refund. An ITIN is a tax processing number issued by the IRS to individuals who are not eligible for a Social Security Number (SSN) — which includes Canadian citizens without US work authorization. If you already have an ITIN from prior US tax filings (rental income, previous sales), use it. If you don't have one, you must apply for an ITIN using Form W-7, which requires original or certified copies of identity documents (passport) and proof of your foreign status. Form W-7 can be submitted simultaneously with your 1040-NR at tax time, or at a US embassy or consulate that serves as an IRS Taxpayer Assistance Center. Processing takes 6–11 weeks. The FIRPTA withholding clock starts on your closing date — the refund timeline assumes you file promptly and have your ITIN in order. A US cross-border accountant can handle the ITIN application and 1040-NR filing simultaneously.

I bought my Florida condo for $220,000 in 2019 and am selling for $400,000 in 2026. Walk me through the exact timeline.

Here is the step-by-step timeline for your scenario. Step 1 (Before listing): Consider whether a Withholding Certificate (Form 8288-B) makes sense. Your expected gain is $180,000 USD; expected US federal tax at 15% LT rate is $27,000 (6.75% of gross). The default FIRPTA withholding would be $60,000 (15% of gross). Applying for Form 8288-B could reduce withholding to $27,000 — saving $33,000 in cash flow at closing. Apply 3–6 months before anticipated closing. Step 2 (Closing day): Settle the property. Buyer's agent withholds either $60,000 (default) or the certificate amount if approved. Receive net proceeds. Step 3 (April following tax year): File US Form 1040-NR reporting the gain, actual tax ($27,000), and claiming the $33,000 excess withholding as a refund. Include your ITIN. Step 4 (6–18 months later): Receive IRS refund of $33,000. Step 5 (Same Canadian tax year as sale): File Canadian T1 reporting the Schedule 3 capital gain in CAD, claim T2209 FTC for the US federal tax actually paid ($27,000 USD = approximately $37,000 CAD at 0.73 rate). Net Canadian tax owing after FTC: approximately $16,000 CAD. Total tax paid: US $27,000 + CAD $16,000 (approximately USD $11,700 equivalent). Total taxes on a $180,000 USD gain = approximately USD $38,700, or an effective combined rate of 21.5%. This compares favorably to many Canadian investors' full marginal rate on a domestic gain.

What happens if I sold US property but never filed a 1040-NR or claimed the FIRPTA refund?

If you are within the statute of limitations (generally 3 years from the filing due date of the 1040-NR for the year of sale), you can still file a late 1040-NR and claim the FIRPTA refund. The IRS applies the 3-year rule for refund claims — if the 1040-NR was due April 15, 2024 (for a 2023 sale), you have until April 15, 2027 to file and claim a refund. After 3 years, the refund is forfeited and cannot be recovered regardless of the amount withheld. In addition to the refund issue: if you earned rental income from the US property in prior years and did not file US non-resident returns, you have unfiled 1040-NR obligations — these may have penalties. The IRS ITIN and 1040-NR compliance requirements for Canadian property owners are frequently handled together by US/Canada cross-border tax specialists who file multiple years simultaneously. If you are in this situation, act within the 3-year window and consult a professional immediately.

Should I sell my US property now or wait?

The tax analysis above gives you the framework, but the decision depends on factors beyond tax: your personal financial situation, USD/CAD exchange rate expectations, the US property market in your specific location, and your use plans for the proceeds. From a pure tax standpoint, the US federal long-term capital gains rate at 15% (for most middle-to-upper income Canadians) is favourable — lower than Canada's top marginal rates and fixed at the federal level for the foreseeable future. Florida's 0% state rate is a structural advantage that makes Florida property specifically tax-efficient to sell. The CAD/USD exchange rate matters significantly: if you bought at CAD/USD 0.75 and are selling at CAD/USD 0.73, the exchange rate is slightly unfavourable versus your purchase rate — a stronger CAD means fewer Canadian dollars from the same USD proceeds. If you believe CAD will weaken further (USD strengthens), holding and selling later produces more CAD. These are judgment calls. The tax mechanics are clear; the market and currency timing are not.

Last updated: March 26, 2026

Reviewed on March 2026 by the Compass Abroad editorial team

Selling Your US Property as a Canadian in 2025–2026: FIRPTA, Taxes, and How to Recover Your Withholding

FIRPTA withholds 15% of your gross sale price at closing — not 15% of your gain. On a $400,000 Florida condo, $60,000 is withheld at closing. If your actual US capital gains tax is $27,000 (15% LT rate on a $180,000 gain), you get $33,000 back from the IRS 6–18 months later via a 1040-NR. Florida's 0% state income tax is a material advantage. You also report the same gain on your Canadian T1 with a Foreign Tax Credit for the US taxes paid.

Thousands of Canadians who bought Florida and other US sunbelt properties during the 2010s are now considering selling — many have significant appreciation and are unsure exactly how the taxes work. The FIRPTA mechanism surprises most sellers because the withholding is on gross proceeds, not on the gain, creating a large cash flow gap at closing that takes months to recover.

Key Takeaways

FIRPTA (Foreign Investment in Real Property Tax Act) requires the buyer of US property owned by a foreign person to withhold 15% of the gross sale price — not 15% of the gain. On a $400,000 sale, $60,000 is withheld at closing regardless of what you paid for the property.
The withheld amount is not the final tax — it is a withholding against your estimated US capital gains tax liability. If your actual US capital gains tax is less than $60,000, you recover the difference by filing a US non-resident tax return (Form 1040-NR).
Canadians can reduce the FIRPTA withholding rate to 10% (from 15%) by applying for a Withholding Certificate (Form 8288-B) with the IRS before or at closing — provided the actual tax expected to be owed is demonstrably less than 15% of gross price.
Florida has no state income tax — a meaningful advantage vs selling US property in states like California (up to 13.3% state CGT) or New York (up to 10.9%). If your US property is in Florida, your US tax bill is federal only.
You must also report the US property sale on your Canadian T1 — the gain is taxable in Canada at the 50% inclusion rate. A Foreign Tax Credit (Form T2209) for verified US federal taxes paid prevents double taxation.
The Canada-US tax treaty governs the interaction between US and Canadian taxation of the same gain — ensuring you are not fully double-taxed, but the ordering of credits and the FTC mechanism require careful calculation.
FIRPTA withholding creates a cash flow gap: your $60,000 is withheld at closing, and recovery takes 6–18 months via the IRS refund process. Plan your post-sale finances around this gap.
If your US property sells for $300,000 or less AND the buyer intends to use it as a primary residence, the withholding rate is 0% (under $300K) or 10% (between $300K–$1M) — the full 15% rate only applies to sales above $1M in this buyer-use scenario.

Key Facts: Selling US Property as a Canadian

FIRPTA Standard Withholding: 15% of gross sale price — withheld by the buyer's settlement agent at closing(IRC § 1445)
FIRPTA Reduced Withholding (<$300K buyer primary residence): 0% if buyer intends primary residence use AND sale price ≤ $300,000(IRC § 1445(b)(5))
FIRPTA Reduced Withholding ($300K–$1M buyer primary residence): 10% withholding (reduced from 15%) if buyer primary residence use(IRC § 1445(b)(5))
Withholding Certificate (Form 8288-B): File with IRS before/at closing to reduce withholding to actual expected tax(IRS Publication 515)
US Federal Capital Gains Rate: Long-term (1+ year): 0%, 15%, or 20% depending on taxable income(IRC § 1(h))
Florida State Income Tax: 0% — Florida has no state income tax; no state CGT on property sale(Florida Statute)
FIRPTA Refund Timeline: 6–18 months after filing Form 1040-NR with the IRS(IRS processing experience)
Canadian Reporting: Sale reported on Schedule 3 (capital gains); FTC on Form T2209 for US taxes paid(CRA)
Canada-US Tax Treaty: Article XIII governs capital gains on real property — Canada retains right to tax gains(Canada-US Convention Art. XIII)
US ITIN Requirement: Must have a US Individual Taxpayer Identification Number to file 1040-NR and claim refund(IRS)

How FIRPTA Works in Practice

FIRPTA (Foreign Investment in Real Property Tax Act, IRC § 1445) was enacted in 1980 to ensure the US government collects capital gains tax from foreign sellers who might otherwise receive their sale proceeds and leave without filing a US tax return. The mechanism is elegant from the IRS's perspective: instead of chasing foreign sellers after the fact, the law makes the buyer responsible for withholding 15% of the gross sale price at closing and remitting it to the IRS.

The withholding is calculated on gross sale price — the full $400,000, not the $180,000 gain. This means FIRPTA can withhold an amount larger than the actual tax owed (and usually does, unless the property has appreciated by more than 100%). The buyer's closing agent or title company handles the mechanics: they receive the withholding from your net sale proceeds, complete IRS Form 8288 (US Withholding Tax Return for Dispositions by Foreign Persons), and remit the funds to the IRS within 20 days of closing.

Your path to recovery: file a US non-resident income tax return (Form 1040-NR) for the year of sale, reporting the actual gain, applying the appropriate long-term capital gains rate (0%, 15%, or 20% based on your US-source taxable income), and claiming the FIRPTA withholding as a tax payment. The difference between what was withheld ($60,000) and what you actually owe ($27,000) is refunded by the IRS — typically 6–18 months after filing.

Worked Example: $400,000 Florida Condo Sale

Tax analysis: $400,000 Florida condo sale by a Canadian in 2026
Item	Amount	Notes
Sale price (gross proceeds)	USD $400,000	Florida condo sold in 2026
FIRPTA withholding at closing (15%)	USD $60,000	Withheld by buyer's settlement agent; not your net proceeds
Net proceeds received at closing	USD $340,000	$400,000 − $60,000 withheld
Adjusted Cost Basis	USD $220,000	Original purchase price + capital improvements + closing costs paid at purchase
US Gross Capital Gain	USD $180,000	$400,000 sale − $220,000 ACB
US Federal CGT (long-term, 15% rate)	USD $27,000	$180,000 × 15% = $27,000 (assuming income in 15% bracket)
Florida State CGT	USD $0	Florida has no state income tax — 0% state CGT
FIRPTA Refund (excess withholding)	USD $33,000	$60,000 withheld − $27,000 actual tax = $33,000 refund via 1040-NR
CAD Equivalent Gain (at 0.73 USD/CAD)	CAD $246,575	$180,000 ÷ 0.73 = CAD $246,575 gain reported in Canada
Taxable amount in Canada (50% inclusion)	CAD $123,288	50% inclusion rate on CAD gain
Canadian federal + provincial tax (estimated 43%)	CAD $53,014	Estimated at 43% marginal rate
Foreign Tax Credit available (US federal tax paid)	≈ CAD $36,986	US $27,000 paid ÷ 0.73 = CAD $36,986 credit on T2209
Net Canadian tax after FTC	≈ CAD $16,028	$53,014 − $36,986 = approximately $16,028 additional Canadian tax
Total US + Canadian tax on sale	≈ USD $27,000 + CAD $16,028	Not double-taxed — FTC eliminates the overlap

Key takeaway from the worked example: The total combined US + Canadian tax on this sale is approximately USD $27,000 + CAD $16,000 — not double the US amount. The Foreign Tax Credit mechanism ensures the US taxes paid reduce (not eliminate, but reduce) your Canadian liability. The effective combined rate on the $180,000 USD gain is approximately 21–22%, which is lower than the full Canadian marginal rate that would apply to an equivalent domestic gain without the FTC benefit.

The Withholding Certificate: Reducing FIRPTA at Closing

Rather than waiting 6–18 months for the IRS to process your 1040-NR refund, you can apply for a Withholding Certificate (Form 8288-B) before or at closing to establish your actual expected tax liability and reduce the withholding to that amount. This is a cash flow management tool — you still owe the same total tax, but you do not have tens of thousands of dollars locked up with the IRS for more than a year.

For the $400,000 example: filing Form 8288-B demonstrating an expected US tax of $27,000 (6.75% of gross, not 15%) would reduce the closing withholding from $60,000 to $27,000 — freeing up $33,000 immediately. The IRS processes 8288-B applications in approximately 3–6 months. You must apply well before your closing date. If the certificate has not been issued by closing, the full 15% is still withheld — you cannot unilaterally apply a lower rate without the certificate in hand.

Engage a US/Canada cross-border tax professional at least 4–6 months before your anticipated sale. They handle the Form 8288-B application, track the IRS timeline, and ensure the certificate arrives before closing. The cost of this service is typically $500–$1,500 — a fraction of the cash flow benefit from reduced withholding on mid-market Florida properties.

Florida vs Other US States: Why the Tax Difference Matters

Florida's 0% state income tax is one of the most tangible financial advantages of Florida property over California, New York, or other high-tax US states. For a Canadian selling a $400,000 property with a $180,000 gain:

Florida: US federal $27,000 + state $0 = $27,000 total US tax
California: US federal $27,000 + state (13.3% of $180,000) $23,940 = $50,940 total US tax
New York: US federal $27,000 + state (~10.9%) $19,620 = $46,620 total US tax
Texas or Nevada: US federal $27,000 + state $0 = $27,000 (same as Florida)

The additional US state tax you pay is also eligible for the Canadian T2209 Foreign Tax Credit — but the credit available is limited by the Canadian tax otherwise payable on the same income. In the California example, the extra $23,940 in US state tax may not be fully creditable against your Canadian liability, depending on your marginal rates, resulting in partial double taxation. Florida avoids this problem entirely.

Canadian T1 Reporting: What to File and When

The US property sale must also be reported on your Canadian T1 return for the year of sale. The gain is reported in Canadian dollars, using the exchange rate on the date of closing for the sale proceeds and the exchange rate on your original purchase date for the adjusted cost base. If you bought at CAD/USD 0.78 and sold at CAD/USD 0.73, these different rates affect your CAD-denominated gain calculation.

Schedule 3 is where you report the capital gain. Form T2209 is where you claim the foreign tax credit for US federal taxes paid. Your Canadian return for the year of sale is typically due April 30 of the following year — before you will have received your IRS FIRPTA refund or filed your 1040-NR. File the Canadian return based on the US taxes you expect to owe (the 15% bracket calculation in the example), and consider whether an amended Canadian return is necessary once the 1040-NR final numbers are confirmed.

Read the complete FIRPTA guide for Canadians for the full legal framework, treaty provisions, and province-by-province FTC notes.

Selling Your US Property in 2025–2026? Get the Tax Process Right.

Our cross-border specialists connect you with US/Canada tax professionals who handle FIRPTA withholding certificates, 1040-NR filings, and Canadian T1 coordination — so you recover your withholding as fast as possible.

Get Connected with a Cross-Border Tax Specialist

Selling US Property as a Canadian: Frequently Asked Questions

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